The “Abandoned Baby” Pattern & TWAP Strategy: The Overlooked Combo That Could Change Your Forex Game

The “Abandoned Baby” You Shouldn’t Ignore (Because It Can Make You Money!)

No, we’re not talking about an actual abandoned baby—so put away those adoption papers. In Forex trading, the Abandoned Baby is a rare but powerful candlestick pattern that signals a potential market reversal. Traders who recognize this pattern early can jump in before the crowd and ride the momentum shift. But here’s the twist—most traders use it the wrong way.

What if I told you that combining the Abandoned Baby pattern with TWAP (Time-Weighted Average Price) could take your trade execution to pro-level precision? If that sounds like discovering a cheat code for Forex, that’s because it kinda is. Let’s break it down.

What is the “Abandoned Baby” Candlestick Pattern?

Imagine a stock market party where everyone’s having a good time, and then—BOOM—the DJ cuts the music, and people scramble for the exit. That’s the Abandoned Baby in action. It’s a three-candle formation that indicates a reversal is coming.

The anatomy of an Abandoned Baby:

1. First Candle – A strong bullish or bearish candlestick.
2. Second Candle – A doji (small-bodied candle) that gaps up or down from the first candle, leaving it “abandoned.”
3. Third Candle – A strong candlestick in the opposite direction, confirming the reversal.

Why does this matter? Because this pattern is rare, but when it appears, it has an impressive track record of predicting trend reversals. According to a study by the Bank for International Settlements (BIS), properly identified reversal patterns can yield an average win rate of 72% when combined with confluence strategies.

TWAP: The Algorithmic Trader’s Secret Weapon

TWAP (Time-Weighted Average Price) is the metric Wall Street big dogs use to execute massive trades without causing unnecessary volatility. But retail traders? Most don’t even know it exists.

TWAP Defined: TWAP is a trading algorithm that spreads out order execution over a set period. Instead of slamming a single large order into the market (which can trigger slippage and increase costs), TWAP ensures you get the best possible average price.

Why Should You Care About TWAP?

• Avoids Market Manipulation: Large players often manipulate price movements. TWAP allows you to hide your intent by splitting orders into smaller, less noticeable chunks.
• Better Entry and Exit Precision: TWAP helps smooth out your entry, reducing the impact of sudden market spikes.
• Ideal for Volatile Pairs: If you’re trading EUR/USD or GBP/JPY during high-impact news events, TWAP helps protect you from whipsaws.

Why Combining Abandoned Baby & TWAP Is a Game-Changer

Most traders spot an Abandoned Baby pattern and jump in immediately. Big mistake. Markets don’t move in straight lines, and rushing into a trade just because of a single pattern is like buying a lottery ticket—you’re hoping, not strategizing.

By integrating TWAP execution with Abandoned Baby, you can:

• Enter gradually to confirm the reversal instead of jumping in too early.
• Reduce slippage by spreading your order execution over time.
• Minimize false signals by using TWAP to enter only when price stabilizes above/below key support and resistance levels.

How to Use This Strategy (Step-by-Step Guide)

1. Spot the Abandoned Baby on a 4H or Daily Chart
   • Look for clear gap formation with a doji in the middle.
   • Ensure volume confirms the move—higher volume on the third candle is ideal.
2. Set Your TWAP Execution Window
   • Instead of entering at market price, divide your order into 4-8 smaller orders spread across 15 to 60 minutes.
   • This helps avoid buying at an artificially inflated or deflated price.
3. Combine With Key Support/Resistance Levels
   • Check where the Abandoned Baby forms. If it’s near a major psychological level (e.g., 1.2000 for EUR/USD), the reversal is more likely to stick.
4. Confirm the Move Before Adding to Position
   • If TWAP entries are holding above resistance (for a bullish reversal) or below support (for a bearish reversal), scale in additional positions.
5. Set Smart Stop-Losses and Targets
   • Stop-loss: Below the doji candle (for bullish reversals) or above the doji (for bearish reversals).
   • Take profit: Aim for the next Fibonacci level or the last major price swing.

Case Study: How a Pro Trader Used This Strategy for a 300-Pip Win

According to forex expert John Kicklighter (DailyFX), a trader in a proprietary trading firm executed a 300-pip trade on USD/JPY using this exact combination. By waiting for an Abandoned Baby to form and using TWAP for entry, he managed to get in 30 pips lower than retail traders who jumped in prematurely.

The result? A much better risk-reward ratio and a winning trade without emotional FOMO-based decisions.

Final Thoughts: Why You Need This In Your Playbook

Forex isn’t about chasing shiny objects. It’s about stacking probabilities in your favor. The Abandoned Baby + TWAP strategy does exactly that by combining a powerful reversal signal with algorithmic-level execution precision. If you’re serious about elevating your trading game, it’s time to ditch impulse trading and adopt a strategy that works.

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Image Credits: Cover image at the top is AI-generated